State Farm Mut. Auto. Ins. Co. v. Jakubowicz

• Decision Date: 26 July 2016
• Docket Number: No. 45S05–1605–CT–00253.,45S05–1605–CT–00253.
• Citation: 56 N.E.3d 617
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant (Defendant below), v. Carol JAKUBOWICZ, individually and as Parent and Legal Guardian of Jacob Jakubowicz and Joseph Jakubowicz, minors, Appellees (Plaintiffs below).
• Court: Indiana Supreme Court

56 N.E.3d 617

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant (Defendant below)

v.Carol JAKUBOWICZ, individually and as Parent and Legal Guardian of Jacob Jakubowicz and Joseph Jakubowicz, minors, Appellees (Plaintiffs below).

No. 45S05–1605–CT–00253.

Supreme Court of Indiana.

July 26, 2016.

Timothy M. Swan, Jennifer E. Davis, Garan Lucow Miller, P.C., Merrillville, IN, Attorneys for Appellant.

April L. Edwards, Boonville, IN, Attorney for Appellee.

William E. Winingham, Jonathon B. Noyes, Willson Kehoe Winingham, LLC, Indianapolis, IN, Attorneys for Amicus Curiae, the Indiana Trial Lawyer's Association.

On Petition to Transfer from the Indiana Court of Appeals, No. 45A05–1502–CT–00078

DAVID

, Justice.

This matter involves the interpretation of an automobile insurance policy in the context of a personal injury lawsuit involving an underinsured motorist (UIM) claim. The policy at issue requires that a UIM claim be brought within three (3) years of the accident and also requires that the insured fully comply with all provisions of the policy prior to bringing suit. One such provision is that State Farm will only pay if the underinsured motorist's insurance has been exhausted. Because the provision requiring an insured to bring suit within three (3) years is in direct conflict with the policy's exhaustion requirement, we hold that the policy is ambiguous and thus, must be construed in favor of the insured. Accordingly, we affirm the trial court's denial of State Farm's motion for summary judgment.

Facts and Procedural History

On August 2, 2007, the Jakubowiczs (mother, Carol, and her two sons) were involved in a car accident with Ronald Williams that resulted in substantial injuries to the Jakubowiczs. The Jakubowiczs were insured by State Farm. On October 7, 2008, Carol Jakubowicz filed suit against Williams (on her behalf and on behalf of her sons). State Farm also filed a complaint against Williams seeking damages for medical and property damage payments it made as a result of the accident.

In December 2009, Jakubowicz put State Farm's counsel on notice that she would likely pursue an underinsured motorist (UIM) claim. However, it wasn't until March 2011, more than three (3) years after the accident, that Jakubowicz filed a motion for leave to amend her complaint and add a UIM claim against State Farm. In her motion for leave, Jakubowicz stated that she believed William's insurance policy would be insufficient to cover her damages. The trial court granted Jakubowicz's motion for leave to amend on July 27, 2011.

Thereafter, State Farm moved for summary judgment on the UIM claim arguing that it was barred because it was filed after the three (3) year limitation period set forth in Jakubowicz's insurance policy. Jakubowicz opposed State Farm's motion, and the trial court denied it. The Court of Appeals accepted State Farm's discretionary interlocutory appeal and reversed the trial court, concluding that Jakubowicz's insurance policy was unambiguous and further, that she failed to comply with the policy's three (3) year limitation period for filing the UIM claim. State Farm Mut. Auto. Ins. Co. v. Jakubowicz, 45 N.E.3d 500, 506 (Ind.Ct.App.2015)

, vacated. Jakubowicz sought transfer, which we granted, thereby vacating the Court of Appeals opinion. Ind. App. Rule 58(A).

Standard of Review

Orders on summary judgment are reviewed de novo and require an appellate court to apply the same standard of review that is applied by the trial court. AM Gen., LLC v. Armour, 46 N.E.3d 436, 439 (Ind.2015)

(citations omitted.) That is, to be entitled to summary judgment, the movant must demonstrate that “the designated evidence raises no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Id. The burden then shifts to the nonmoving party who must demonstrate that there is a genuine issue of material fact. Id. All reasonable inferences are construed in favor of the nonmoving party. Id.

Additionally, “[a]n insurance policy is a contract, and as such is subject to the same rules of construction as other contracts.” Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 251 (Ind.2005)

(citations omitted). Interpretation of a contract is a pure question of law and thus, is reviewed de novo. Harrison v. Thomas, 761 N.E.2d 816, 818 (Ind.2002).

Discussion

At issue in this case is whether the State Farm policy language, with regard to the procedure for an insured to bring an underinsured motorist claim against State Farm, is ambiguous. Insurance policies with directly conflicting terms are ambiguous. Wert v. Meridian Sec. Ins. Company, 997 N.E.2d 1167, 1171 (Ind.Ct.App.2013)

. Where there is ambiguity, insurance policies are construed strictly against the insurer, and the policy language is viewed from the standpoint of the insured. Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049, 1056 (Ind.2001). This is especially true where the language in question purports to exclude coverage. USA Life One Ins. Co. of Ind. v. Nuckolls, 682 N.E.2d 534, 538 (Ind.1997). Insurers are free to limit the coverage of their policies, but such limitations must be clearly expressed to be enforceable. “W.

Bend Mut. v. Keaton, 755 N.E.2d 652, 654 (Ind.Ct.App.2001), trans. denied. ” “Where provisions limiting coverage are not clearly and plainly expressed, the policy will be construed most favorably to the insured, to further the policy's basic purpose of indemnity.” Meridian Mut. Ins. Co. v. Auto–Owners Ins. Co., 698 N.E.2d 770, 773 (Ind.1998). Furthermore, when construing the language of an insurance policy, a court “should construe the language of an insurance policy so as not to render any words, phrases or terms ineffective or meaningless.” Wert, 997 N.E.2d at 1170 (citation omitted).

Here, the policy provides, in relevant part:

Deciding Fault and Amount—... [UIM] Vehicle Coverage

1. a. The insured and we must agree to the answers to the following two questions:

(1) Is the insured legally entitled to recover compensatory damages from the owner or driver of the [UIM] vehicle?

(2) If the answer to 1.a.(1) above is yes, then what is the amount of the compensatory damages that the insured is legally entitled to recover from the owner or driver of the ... [UIM] vehicle?

b. If there is no agreement on the answer to either question in 1.a above, then the insured shall:

(1) file a lawsuit, in a state or federal court that has jurisdiction against:

(a) us;

(b) the owner and driver of the ... [UIM] vehicle:

(i) unless we have consented to a settlement offer proposed by or on behalf of such owner or driver; or

(ii) unless such owner or driver is unknown; and

(c) any other party or parties, who may be legally liable for the insured's damages;

(2) consent to a jury trial if requested by us;

(3) agree that we may contest the issues of liability and the amount of damages; and

(4) secure a judgment in that action. The judgment must be the final result of an actual trial and any appeals, if any appeals are taken.

* * * *

13. Legal Action Against Us

Legal action may not be brought against us until there has been full compliance with all the provisions of this policy. In addition, legal action may only be brought against us regarding: ...

c. ... [UIM] Vehicle Coverage if the insured or that insured's legal representative within three years immediately following the date of the accident:

(1) presents ... an ... [UIM] Vehicle Coverage claim to us; and

(2) files a lawsuit in accordance with the Deciding Fault and Amount provision of the involved coverage.

Except as provided in c.(2) above, no other legal action may be brought against us relating to ... [UIM] Vehicle Coverage for any other causes of action that arise out of or are related to these coverages until there has been full compliance with the provisions titled Consent to Settlement and Deciding Fault and Amount.

(Appellant's App. at 159–60, 177–78) (some internal emphasis omitted).

The policy also provides:

[UIM] Vehicle Coverage

We will pay compensatory damages for bodily injury an insured is legally entitled to recover from the owner or driver of an [UIM] vehicle. The bodily injury must be:

a. sustained by an Insured, and

b. caused by an accident that involves the operation, maintenance, or use of an [UIM] vehicle as a motor vehicle.

We will pay only if the full amount of all available limits of all bodily injury liability bonds, policies, and self-insurance plans that apply to the insured's bodily injury have been used up by payment of judgments or settlements, or have been offered to the insured in writing.

(Appellant's App. at 159.)

State Farm sought summary judgment because Jakubowicz filed her UIM claim against State Farm outside of the three (3) year limitation period provided in the policy. The policy provides that a UIM claim against State Farm “may only be brought ... within three years immediately following the date of the accident.” (Appellant's App. at 177.) However, Jakubowicz argues the policy language is ambiguous, and as such, the limitation provision is unenforceable, because on one hand, the policy prohibits insureds from filing suit more than three (3) years after the date of the accident, and on the other, it requires that legal action may not be brought until there has been “full compliance with all the provisions of this policy.” (Id.) One such provision provides that: “We will pay only if the full amount of all available limits of all bodily injury liability bonds, policies, and self-insurance plans that apply to the insured's bodily injury have been used up by payment of judgments or settlements, or have been offered to the insured in writing.” (Appellant's App. at 159.) Jakubowicz argues that this amounts to an exhaustion requirement and as such, the policy language potentially requires insureds to file suit before they are in full compliance with the policy.¹ Thus, as Amicus, the Indiana Trial Lawyer's Association, observed: “[i]nsureds are simultaneously told that they must file a...